Research

Supply Chain

Piloting a “Rep-less” Model To Reduce Orthopedic OR Costs

Operating rooms have historically been among the highest sources of revenue for healthcare systems, but declining reimbursement has pressed the supply chain to examine new ways to improve their bottom lines. By most estimates, the OR represents between 40% and 60% of hospital supply spend, but cost reduction is faced with a number of challenges: vendor pressure, physician preferences, poor inventory management, and lack of standardization and data.

Orthopedics, especially, is feeling the pressure. The Centers for Medicare & Medicaid Services (CMS) in July 2015 proposed an initiative that would bundle payments for joint replacements based on the entire episode of care–from time of surgery until 90 days post-discharge. Based on the hospital’s quality and cost performance during the episode, a facility may receive additional payment or be required to repay Medicare for a portion of the costs.

Recognizing an aging population that is expected to see explosive growth over the next four decades and anticipating possible mandatory bundled payments on the horizon, a large health system in Louisiana is working to reform its orthopedic surgery practices. Working to reduce vendor impact, a one-year pilot project’s most prominent feat